Deal for first nuclear plant in a generation will attract more providers to
Britain, say industry experts, as Government agrees strike price for Hinkley
Point

The Government's deal with EDF will encourage other players to invest in new nuclear in Britain, industry experts have said.

Following months of negotiation, ministers have agreed a “cut-price” deal with the French power giant behind the project, paving the way for construction to begin at the Somerset site, provided the plan wins EU approval.

Tony Ward, head of power and utilities at EY, hailed the agreement as "one of the most significant enablers to unlock positive investment decisions, not just from EDF at their Hinkley site, but other potential co-investors, and subsequently from other developers."

He added that a "significant construction programme of new nuclear stations" would boost the UK economy by up to 0.34pc a year, and could generate as much as £1.6bn in nuclear exports.

Daniel Grosvenor, head of Deloitte’s UK nuclear practice, said the deal would "open the flood gates" for more investment in the sector.

He said the deal "shows that the UK can attract the international investment our energy sector desperately needs".

"If state aid clearance can be secured [from the EU], the UK contract for difference [strike price] will increasingly be seen as a potential mechanism for enabling finance and private sector investment in low carbon generation across the continent."

EDF Energy's Hinkley Point C power station in Somerset

David Cameron hailed as "brilliant news" the £16bn of new investment and 25,000 jobs he says will come to Britain as the Government struck a deal for the country’s first new nuclear plant in a generation on Monday.

"As we compete in the tough global race, this underlines the confidence there is in Britain and makes clear that we are very much open for business," said the Prime Minister.

"This also marks the next generation of nuclear power in Britain, which has an important part to play in contributing to our future energy needs and our longer term security of supply".

Prime Minister David Cameron meets workers in the Charge Hall at Hinkley Point B in Somerset (PA)

Ed Davey, Energy Secretary, claimed the deal with EDF Energy - and its two Chinese partners - to build the new Hinkley Point plant in Somerset is “good for Britain” and will help to bring down energy bills.

Ministers have agreed with EDF, after more than two years of negotiations, that the French company will be guaranteed a “strike price” of £92.50 for every megawatt hour of power produced by the Somerset plant for 35 years.

But a flexible price has been established that could see a lower strike price for energy from Hinkley of £89.50 if the EDF consortium pushes ahead with plans to build another nuclear plant at Sizewell in Suffolk.

An artist's impression of the planned Hinkley Point C nuclear power station in Somerset (EDF Energy)

EDF wanted a considerably higher price, in the region of £100 for the Hinkley strike price, but has accepted what is being seen as a compromise. It is understood the cost of the Sizewell development could be much lower than Hinkley, benefiting from the time and spending involved in developing the Somerset plant, and bringing the overall energy cost down for the taxpayer.

Vincent de Rivaz, EDF chief executive, called the deal "good, fair and balanced for consumers, the UK and EDF."

The revised price is still almost 50pc above current wholesale market energy price levels – and will be “topped up” through levies. But consumers will not start helping to meet nuclear bills until power starts flowing in 10 years’ time.

The proposed landscaping at the development site after completion of the new power station (EDF Energy)

Mr Davey had set his sights on getting the strike price below £90. “We’ve got an extraordinarily good deal for the consumer,” he said. “Our figures show the cost is considerably less than had been suggested so far.”

The Energy Secretary also hailed the deal as "the first time nuclear power stations in this country will be built without money from the British taxpayer."

He claimed consumer bills will be £77 lower when the full nuclear programme is completed by 2030 but he is expected to face hurdles in getting EU clearance over substantial subsidies being paid to the EDF group.

The price incentive is one of the surprise elements in a nuclear power package the Government believes represents a better than expected outcome to extensive negotiations leading to the construction of the first UK nuclear plant since 1995.

Hinkley Point nuclear power station in Somerset (Christopher Jones)

Hinkley’s cost is now being pitched at £16bn rather than the original £14bn cited by the developers, with the revised figure including £2bn of pre-construction stage costs. The project will also carry loan guarantees from the British Government.

But EDF and its Chinese partners – confirmed as China National Nuclear Corporation, and China General Nuclear Power Corporation - will have to meet the cost of any delays or overruns at Hinkley Point. They have, however, agreed to share any savings with the taxpayer if the project comes in below budget.

The partners have apparently responded to Government pressure to “buy British” and have agreed to spend 57pc of the Hinkley investment with UK firms.

The issue has become even more controversial with the Big Six power firms unveiling hikes of more than 9pc in electricity and gas prices.

The Archbishop of Canterbury Justin Welby and Deputy Prime Minister Nick Clegg both raised concerns about the increases over the weekend.

Mr Welby told the Mail on Sunday the companies had to be "conscious of their social obligations" and "behave with generosity and not merely to maximise opportunity".

Mr Clegg demanded more evidence that the hikes were needed at all.

"Clearly the companies need to justify the bill increases that they are now announcing," the Liberal Democrat leader told Sky News' Murnaghan programme.

"It cannot be right that people who are really struggling - many, many people still struggling to pay their weekly, their monthly bills, where electricity and gas bills for this winter are a looming worry - it can't be right that those bills are increased for those households in our country and yet it is all rather opaque about what drives these increases.

"Because some of the companies are not really open enough yet and transparent enough yet about their own balance sheet."